Property and sales taxes are regressive and are the largest taxes paid by the low income groups. Income tax rates at the low end are negative. That is because the amount received via tax credits often exceeds tax liabilities.

Tax dollars paid by low income households

For the two lowest income groups, here are these same figures in terms of the actual amount paid.

Who pays the lotto?

Numerous studies conducted in a wide range of jurisdictions show that frequent or “heavy” lottery players closely resemble the overall population of that state or province.

The NASPL website lists several studies and surveys supporting this opinion. However, there are several other studies that conclude the lottery is indeed disproportionately played by the poor.

I am not an expert on the matter, and there seems to be wide disagreement here anyway. So I cannot estimate these figures with any sort of realistic accuracy. But just for fun, lets take one study, make a few assumptions, and see what comes out.

The lowest socioeconomic status group is more likely to have played the lotto in the past year, and on average they played more often

These figures come from a 2010 study on gambling habits. The income of the households was not known, so the researchers determined socioeconomic status as “a composite measure of education and occupational prestige, equally weighted.”

Taking this socioeconomic status as a substitute for income (not exact, but not completely off the mark), and assuming the amount spent on the lottery is proportional to the number of days played, here is how the numbers come out.

I'm an NYC-based entrepreneur (my newest project: Blueshift) and adjunct instructor at UPenn. I'm fascinated by data visualization and the ways that data is transforming our understanding of the world. I spend a lot of time with my face buried in Excel, and when I find something interesting I write about it here and also as a Guardian Cities and Huffington Post contributor.More about my background

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I find your tax-on-the-poor argument misinformed and condescending. Some folks escape their everyday lives in a movie theater seat. Others do so while spending $2 to scratch off a lottery ticket dreaming of what they might do if they win. Both provide a form of escapism entertainment. Nothing wrong with that. One man’s gratuitous expenditure is another man’s night at the opera.

http://metrocosm.com/ Max Galka

Lotto is a form a gambling. Have you ever met a family that has had to cope with gambling addiction? I have, and they do not view it anything like a trip to the movie theater.

Bryan Kelleher

Most addictions are harmful. We all have or can find anecdotal evidence to support this claim. But your “I-know-a-guy” argument doesn’t change the fact that more than 51% of U.S. households play the state lottery at least once in a given year and 99% of those players do not suffer from addiction. My point was simply who are you (or the author of the article) to tell me or anyone whom you contemptuously call poor how to spend our money? I don’t challenge your dubious spending on MacMansions, $200 bottles of wine, or collateralized debt obligations.

http://metrocosm.com/ Max Galka

Given that your email domain is a lottery website and your income likely comes from selling lotto tickets, your opinion is not exactly unbiased.
But you said it. Addictions are harmful. Show me someone with a life devastating Kardashians addiction and I will take your argument seriously.

David Justus

The state Lottery Commission in Tennessee recently ran an ad showing a man contemplating whether he should buy lottery tickets or food. Also the internet is replete with examples of how the core play the lottery very disproportionately and that the school’s never actually receive any additional funding over what they received before the lotteries were started and that the tax money while coming disproportionately from for core districts flows even lead to all district so that rich School districts benefit off the backs of money paid by the poor. Your opinions and statements seem to me to be the only condescension on this site

marcbrooks

The lottery is not a tax. It’s a willingly submitted donation.

David Justus

It is a tax, albeit a voluntary one, the same as alcohol, tobacco, and even sales taxes.

http://gravatar.com/yxlbar VR

The tax comparison is misleading in that a lottery ticket does have an expected return of $.60 or so, so you should reduce the “tax” amounts.

I personally wish we would destroy all the state lotteries, but the value of the entertainment is a real thing for the people who play it. Unfortunate but real.

http://metrocosm.com/ Max Galka

In most cases, I don’t think it’s the government’s business how people spend their money. But gambling is something people do impulsively, so in my opinion not the same as other forms of entertainment. I also don’t feel great about the government encouraging it with commercials, as a way to get rich.

Some of it comes back in winnings, but the few people who get rich with the big prizes don’t offset the many people who lost their money buying tickets. There is also the tax on the winnings, the fact that many prizes don’t get claimed, etc. None of it materially changes the result, which is back of the envelope anyway.

http://blog.freelotto.com Bryan Kelleher

I wish they would abolish the Broadway show Cats, Keeping Up with the Kardashians, and Chardonnay. Unfortunate but real.

L A Keel

Tell that to the people I see whenever I go inside the convenience or grocery store, gas station, etc, who are handing in their fistful of a variety if lottery game tickets from last week, collecting the buck or 2 from scratch offs, handing over $20.00 more in hopes that next week might bring in a $50, $100 win, while they regularly kick in $80-100/mo or more to feed their dreams of next time.
Have yet to see anybody yell that they won big.

Robert

I look at the lottery as a voluntary state income tax, with a chance of a return. My concern is more of what lottery money is used for over who plays it. Interesting analysis, though.

http://metrocosm.com/ Max Galka

A totally valid opinion. and if it wasn’t for a few particular aspects of the lotto, I would agree. But here is what stops me:

– Even if people are responsible for their own choices, I think it is irresponsible for the government to encourage gambling, knowing that people do it impulsively against their own interests.
I would say the same if the government had commercials encouraging people to smoke.

– If they are going to make the case that people have a choice, why not open it up to the free markets? The government has laws against anti-competitive business practices when they happen in the private sector. Why should it be ok for the government to operate a monopoly?
If they let private business operate lotteries, the payout rates would be much better. As it stands, the government is basically running a price gouging operation.

Those are just personal views though. Don’t think there is a right answer here.

ezra abrams

BUT
a tax is required: they put you in jail if you don’t pay
lottery, sports etc are voluntary

how on earth can someone smart enough to have done the incredible map of property values say that a voluntary payment like the lottery is tax ?
I’m really disappointed that you stoop to that level

In the final analysis, in a democratic society, people have to have some level of responsibility

Who are you to tell other people how to spend their money ?
Who appointed you god , to tell other people how to live their lives ?

http://metrocosm.com/ Max Galka

We live in a free market society and people should be able to spend their money how they want. No argument there.

But free markets only work if they are free on both sides. And at the moment, the government has a monopoly over the lottery. And it is extorting monopolistic profits. The result is exactly the same as a sales tax.

To make things worse, problem gambling is medically recognized as a addictive disorder. And the government should not be promoting it with misleading ads. If the government were releasing ads encouraging people to smoke, I would not be in favor of that either.

David Justus

Don’t you ever pay the voluntary sales tax?

Jerry Hoefen

Max your probley one only honest reporters left in usa . Given odd are increased by government only means system is rigged in governments favor period. States like new York who promote gambling also has high percentage of crime ,family abuse ,divorces, broken homes where men don’t live at home to help raise kids. List goes on an on an on just like that new song on radio. Even nitely news in game with all the winning numbers to let people know they lost or born losers. Make it worse government also promotes the exporting of jobs in new York by buying those imports from company who export jobs over seas using our taxs

I made the calculation (came out to about $600 for SS and $150 for medicare for the bottom group), but ultimately did not include them, and don’t remember why. Need to go back over my notes and add an explanation to the post.

Thanks for pointing out.

http://metrocosm.com Max Galka

http://ameryx.wordpress.com ameryx

Mr. Galka, would it make sense to use the economic profile of lottery winners as a proxy for the economic profile of lottery players? Not all winners would be captured, since I’m sure there is no recording of small winnings. But larger winnings are tax events; Powerball-like winnings are news events. And if the likelihood of winning is based on frequency of playing, then the pre-winning economic profile of winners might be a reasonable profile for the economic profile of players as a whole.

I teach economics ata community college, and regularly explain how profoundly evil the state lottery is. I characterize as a tax on the financially ignorant.

http://metrocosm.com Max Galka

It’s a good suggestion. I have a list of all winners in CA during one year via Freedom of Information, and it’s a large sample. It would be easy to guess an economic profile based on where they live. Though I’m not sure if there is a way to get the economic profile of the people themselves.

David Justus

Good article, and I agree overall, the state run lotteries are shown to NOT INCREACE SCHOOL FUNDING, and are a regressive tax.However I must correct you about sales, and property taxes, they are proportional, not regressive.

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